The U.S. Postal Service is reportedly planning to impose a fuel surcharge on package deliveries for the first time in the agency’s history amid surging fuel costs.

The Wall Street Journal reported that the Post Service is planning an 8% surcharge beginning in April and that the agency plans to phase it out in January 2027, according to two people familiar with the matter.

According to the report, the fuel surcharge will only apply to packages and won’t affect letter mail.

The move comes as both FedEx and UPS have longstanding fuel surcharges that have been increased in recent weeks as oil prices surged due to the Iran war disrupting oil flows from the Middle East.

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USPS is reportedly planning to implement a temporary 8% fuel surcharge amid surging oil costs. (Andrew Harrer/Bloomberg via Getty Images)

Diesel prices have surged to $5.366 a gallon as of Wednesday, up from $3.749 a month ago, an increase of more than 43% in that period.

The Postal Service has faced long-term financial challenges, and Postmaster General David Steiner told Congress earlier this month the agency is on pace to run out of cash in less than a year without significant reforms.

Steiner testified before a House Oversight subcommittee and told lawmakers that the USPS needs higher stamp prices and the ability to borrow more money.

He also called for other reforms, including changes to pension funding and liabilities calculations, workers’ compensation and retirement fund investment strategies.

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USPS plans for the fuel surcharge to be temporary and sunset early in 2027, according to the report. (Joe Raedle/Getty Images)

Steiner also put forward options for cutting costs, including ending six-day-a-week deliveries, closing post offices or raising first-class mail stamp prices from the current 78 cents to $1 or more.

He said that if USPS reduced deliveries to five days a week, it would save the agency about $3 billion per year, while closing small post offices in remote areas would save about $840 million.

However, he cautioned that those options “may not be palatable to Congress or the American public.”

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USPS’ six-day-a-week delivery schedule is one reason the agency is facing financial struggles. (Bess Adler/Bloomberg via Getty Images)

Stamp prices have risen 46% since early 2019, when they were last 50 cents. Steiner argues those prices are still far lower than postage costs in other countries.

USPS has also reached its current borrowing cap of $15 billion, precluding the agency from taking out additional loans.

“In order to survive beyond the next year, we need to increase our borrowing capacity so that we don’t run out of cash,” Steiner said in prepared testimony. “The failure to do this could lead to the end of the Postal Service as we know it now.”

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Since 2007, USPS has reported net losses of $118 billion as volumes of its most profitable product, first-class mail, fell to the lowest level since the late 1960s.